It is a well-accepted fact that when sovereignty is in question, Chinese leadership adopt a conservative, nationalistic, and increasingly aggressive posture. This has been manifesting itself with increasing intensity regarding the various disputed territories it contests with India, Vietnam, Philippines, Taiwan (a unique case) and Japan.

For the past couple of years, particularly since 2011, there have been flare-ups and violent protests coupled with military naval drills with its neighbors to its south and east, most recently with Japan. Earlier this month the Chinese released new microchip passports, and printed as watermarks inside are maps that include each disputed area in South and South-East Asia, proudly displayed to be part of the People’s Republic of China. Unsurprisingly this has caused a diplomatic uproar from the offended countries, that see this move as another example of China displaying indifference to their concerns, and part of a trend which sees China expecting increasing acquiesce to its actions.

China is effectively asking these countries to stamp passports that contain officially disputed territories. This is not the first time that China has chosen to take territorial action via passport and visas. In controversial fashion it recently denied visas to Indian residents in Arunachal Pradesh (part of which China considers south Tibet), on the grounds that they are not recognized as Indian citizens.

The country denied entry to an Indian military official who was part of an official delegation heading to meet their Chinese counterparts, quite an insult. Henry Kissinger, in his book On China, equated Chinese foreign policy to the principles of Weiqi, a Chinese board game that basically involves encircling the opponent till all avenues for escape no longer exist, and one person claims majority of the territory.

Using the same principles, a Chinese overall design regarding Asia seems to emerge.

1. Weiqi Style Encirclement.

For the past decade, China aggressively moved to increase trade between itself and the Asian region, part of a win-win scenario it championed across the globe. China played down conflict and land disputes as not significant enough to prevent trade, a pragmatic approach that certainly has brought great dividends to the entire region.

Sino-Indian trade increased from approximately $75 million to $2 billion since 2000, with China becoming India’s largest trade partner. In South-East Asia, under the ASEAN umbrella, China’s trade with this region stands at $329 billion, an increase by 29% from the previous year, and is expected to reach half a trillion by 2015.

These economic links have proved prosperous for all involved, but there has been a steadily growing asymmetry in these relations. While China has become India’s largest trade partner, India remains only China’s 11th largest, with whom it runs a $45 billion trade deficit with China, importing more than it exports. In an article I wrote earlier this year (in Chinese) I explained the intricacies and geopolitical implications this trade deficit.

Meanwhile, within ASEAN, China’s GDP is three times the size of the entire region (in purchasing power parity terms), therefore South East Asia is more prone to risks and proportionally has more at stake. There has been massive Chinese foreign direct investment in projects across the region, including ports, major roads, and highways, all of which involve Chinese firms.

Joseph Nye, the architect of the soft power theory, explained that asymmetrical economic relations gives the country that relies more on the other a distinct disadvantage and creates lopsided sharing of power. Over the past decade China has successfully integrated itself multilaterally with the region, and is now beginning to test its newly gained power.

2. Consolidation of Power.

It is unwise to ignore the effect of China’s internal changes on the foreign policy. The new Chinese leadership under President Xi Jinping, having only formally taken power for less then two weeks, has been looking to consolidate its power both within the party as well as rally the Chinese people around the communist party.

Xi has impressed many with his confident, jargon free, and candid demeanor outlining China’s future just two days ago. “We are at the closest point towards the Chinese nation’s renaissance than any time in modern history," he said, "and I am sure we will accomplish our goal.”

A look at micro blogs such as Weibo shows that Xi has impressed many young Chinese, who finally see a leader they can relate to. China’s latest aggressive stance asserts more power within Asia, and reflects very highly on the new leadership.

3. Who Will Blink First?

The Indian and Philippine governments immediately stated they will not stamp these passports, and instead will staple in a temporary piece of paper that will act as a visa. Vietnam has gone one step further and refused point blank to allow entry to holders of the new passport. Overall, this creates a negative environment for trade, along with a host of diplomatic nightmares.

Take the example of Vietnam. A Chinese company is in charge of building a highway that runs from Nanning in China, and passes through Vietnam, offering major trade benefits to the country. If Vietnam follows through and does not allow entry to Chinese citizens who carry the new passport, it will put an obstacle in the works of the highway. This is merely one of a multitude of scenarios. The site 2point6billion does well to explain the implications of Vietnam'sreaction and the harmful effect on the business environment.

China surely must have expected such a reaction, and therefore has calculated that these countries have more too loose than to gain by adopting such a stance, expecting countries to transiently back down. It is interesting to note that the disputed islands with Japan, China’s second largest trade partner with whom its bilateral relationship doesn’t share similar asymmetry, were not included in the map. This is hardly a coincidence.

How this issue moves forward could set a precedent for China’s behavior towards its neighbors, but will surely cost China a large portion of the goodwill and soft power it has created over the years. It would be unthinkable for the Chinese leadership to revert its decision to print these controversial maps, for it would be a criminal display of weakness.

Yet, if countries such as India and Vietnam choose to accept these change in status quo it will bode ill for any successful future negotiations. These countries should worry that eventually their disputed territories will become increasingly accepted as Chinese. It seems that Chinese leadership is evolving from the “peaceful rise” doctrine as the countrylooks to close in on what it sees as rightfully Chinese. Armed with economic warfare that is designed to hurt, because while guns and missiles may break bones, economic warfare can prove just as deadly.